In analyzing the final chapter of Theranos founder Elizabeth Holmes’ career, it’s tempting to attribute the entrepreneur’s dramatic downfall to greed and hubris. But a series of fatal errors in Holmes’ approach to corporate and litigation communications is also to blame.
From implementing a management style based on secrecy and ignoring employees who voiced concerns, to shunning—at times even provoking—credible journalists, Holmes’ undoing was a clinic in what not to do when faced with scrutiny and legal jeopardy.
To be sure, Holmes demonstrated an uncanny ability to dupe sophisticated investors, accomplished board members, savvy clients in the retail and medical sectors, and intrepid journalists as she marketed her firm’s flawed lab testing technology under false pretenses.
And while Theranos employees drank the Kool-Aid for years, internal discontent that prompted team members to go public with their grievances is what ultimately took down the company, sparked a litany of litigation, and sealed Holmes’ fate as a disgraced “former” CEO.
The audacity of the Theranos fraud may qualify it a once-in-a-generation scheme, but the Holmes saga offers a cautionary tale for PR professionals, business leaders, and attorneys faced with plotting a litigation strategy and evaluating corporate culpability.
While Holmes’ ultimate unraveling may have been inevitable given the size and scale of her deception, the following communications missteps—each of which could have been prevented with a cohesive strategy in place—proved particularly hurtful to her cause.
Chaos, From the Inside Out
As Holmes and her publicists were busy landing cover stories in Forbes, Fortune and Inc., Theranos’ corporate communications team was either unaware or unconcerned about internal restlessness. Just as Holmes was courting investors and hyping her product in the national media, employees were voicing concerns to their managers and even Holmes herself.
Internal emails released during litigation revealed that Theranos team members repeatedly complained about Holmes’ penchant for secrecy and raised questions about the efficacy and accuracy of the company’s flagship blood testing product. It was only a matter of time before employees began venting their grievances in the news media, in turn shrouding the company’s business model under a cloud of uncertainty and forcing Holmes to play defense.
A well-thought-out internal strategy aimed at opening lines of communication with employees and promoting company culture could have gone a long way toward addressing concerns and containing the ill will before it seeped into the public realm. Before employees resorted to airing their dirty laundry, Theranos executives should have made it clear that they were taking internal feedback seriously and amending their practices as a result. Instead, the coverup continued.
A Flawed Approach to Media Relations
In an ironic twist, Holmes embraced the media on the way up as she cultivated her brand as the world’s first self-made female billionaire, and then antagonized the media on the way down as reporters questioned the veracity of Theranos’ claims.
This about-face took hold in 2015, when Wall Street Journal reporter John Carreyrou began chasing down a tip that raised questions about Theranos’ lab testing technology. Carreyrou’s reporting sent shockwaves through Silicon Valley and prompted an onslaught of additional media coverage on Holmes and her company.
Rather than refuting these reports with data-driven answers, Holmes circled the wagons. The moment she came to view press coverage as a liability—rather than a launchpad—she began rejecting interview requests and challenging the media’s legitimacy.
This approach created an air of culpability as lawsuits piled up and did little to help her defense strategy. As Holmes faded away from public view to protect her legal position, her attorneys should have done their part to balance the narrative surrounding her case as spokespersons themselves. Instead, they remained on the sidelines as the negative sentiment surrounding Holmes and Theranos became a runaway train.
Likewise, there was a conspicuous absence of third-party surrogates willing to speak on Holmes’ behalf. Theranos board members, fearing they themselves might be liable, largely remained quiet. Investors and clients shifted their focus from singing Holmes’ praises to plotting legal strategies of their own. Disgruntled employees, feeling vindicated, fueled the flames by leaking internal correspondence that further undermined Holmes’ position.
Once Holmes’ litigation strategy took hold, her attorneys rightly forbid her from publicly rebutting damning claims levied against Theranos. This retreat from public view, coupled with the lack of allies coming to her defense, exacerbated Holmes’ credibility problem and forced many of the media’s questions to go unanswered. The silence was deafening.
That a company so large perpetrated a fraud for so long—in the highly-scrutinized consumer health care sector, no less—is staggering. In the end, Theranos’ collapse was a consequence of Holmes’ controlling tendencies, penchant for secrecy, and web of lies. Yet, the company’s undoing was also aggravated by poor internal communications and a haphazard public relations strategy that focused too heavily on promoting Holmes’ personal brand at the expense of everything else—including her litigation defense.
With today’s employees putting greater emphasis on workplace transparency, another Theranos-level fraud materializing in plain sight is difficult to imagine. Still, the lessons gleaned from Holmes’ short-but-tumultuous career will prove invaluable for PR practitioners, litigators, as well as executives and the companies they lead, for years to come.
Aaron W. Gordon counsels C-suite executives, public companies, and entrepreneurial firms across a range of sectors through his work at Schwartz Media Strategies, an integrated communications firm based in Miami, Florida.